Private-sector firms bidding on a public-private partnership lease run their numbers through a variety of studies and models before setting a price with a state. States should do the same. When policy makers are considering a lease, it is important to commission studies that fully inform them about what they should expect from a lease and enable them to negotiate better with bidders. States interested in leasing their transportation infrastructure should conduct a traffic and revenue study; a transportation engineering and cost study that examines the physical characteristics and capacity of the system; and an independent and objective financial assessment. The financial assessment should combine the information generated in the traffic and revenue and engineering studies and consider the value and associated financial risks of the deal in varying circumstances.
The state may already have an inventory cataloguing the significant elements of the road system, such as bridges and toll plazas. Before proceeding with a concession, however, it should develop an accurate asset register-essentially a more sophisticated inventory that includes the current state of repair of each of the elements and what would be needed to keep them in good condition. Such a list, while expensive to develop and maintain, provides a guide to what would be leased to the private operator and clarifies the conditions in which the state expects to receive the road back at the end of the lease.
Policy makers should also contemplate the potential long-term effects of the lease on the environment and the state's overall transportation network. To date, concession negotiations in the United States have resulted in long-term leases, yet the debates about them have focused primarily on short-term issues. It's impossible to know what ground transportation may look like decades from now. It's crucial, though, that policy makers think about how the transfer of a key piece of the state's infrastructure may affect other methods of transportation, and the safety and reliability of the entire network.52
As states consider how long they might want to lease their assets, they should give thought to the potential problems that could arise for future generations. Most of the funds are received upfront while the payments to the private sector in the form of tolls are gathered over time and usually increase in real terms. The current generation enjoys most of the gains from the concession while future generations face most of the bill. It's important to remember, however, that future generations also will benefit from an improved and well-maintained road system-assuming this is how the state spends the upfront funds. Using them to improve the finances of the city or state, as in Chicago, can lead to future benefits through lower borrowing costs. Additionally, if the funds are spent on new transportation modes or another type of infrastructure, future generations may benefit.53